Ltd. Vs. the Custodian  Insc 639 (14 October 2004)
Ruma Pal & Arun Kumar Ruma
The question raised in this appeal is whether the Special Court constituted
under The Special Courts (Trial of Offences Relating to Transactions in
Securities) Act, 1992 (hereinafter referred to as 'the Act') has power to
condone the delay in filing a petition under Section 4(2) of the Act.
The object of the Act as stated in the Statement of Objects and Reasons is
to deal with the situation created by large scale irregularities and
malpractices in transactions in securities indulged in by some brokers in
collusion with the employees of various banks and financial institutions. In
particular, the Act seeks to ensure speedy recovery of the funds which have
been diverted from banks and financial institutions to the individual accounts
of brokers. The other objectives of the Act are to punish the guilty and to
restore confidence in and maintain the basic integrity and credibility of the
banks and financial institutions.
With these objectives in view the Act provides for the appointment of one or
more Custodians to take action against any person involved in any offence
relating to transactions in securities for the period after 1st April, 1991 upto and including 6th June, 1992. In terms of sub-section (3) of Section 3 of the
Act, the Custodian may notify the name of the such person in the Official
Gazette. From the date of such notification, any property moveable or
immoveable or both, belonging to any person so notified stands attached under
Sub-section (3) of Section 3. Such attached properties may be dealt with by the
Custodian in such manner as the Special Court may direct.
The Special Court was established under Section 5 of the Act. It has the
same jurisdiction as a Civil Court inter alia in relation to any matter
relating to any property attached under Sub-section (3) of Section 3 of the Act
as well as in relation to transactions in securities entered into during the
aforesaid period in which the person notified is involved as a party, broker,
intermediary or in any other manner (Section 9-A(1) ).
Sub-Section (2) of Section 4, ( in so far as it is relevant) permits any
person aggrieved by a notification issued under Sub-section (2) of Section 3 to
file a petition objecting to the notification within 30 days of the issuance of
The Special Court after hearing the parties may make such order as it deems
fit on such petition. While dealing with such a case, the Special Court is not
bound by the procedure laid down by the Code of Civil Procedure, 1908, but
shall be guided by the principles of natural justice and, subject to the other
provisions of the Act and of any Rules, the Special Court has the power and
under Sub-section(4) of Section 9 to regulate its own procedure. Section 10(3)
of the Act, provides for an appeal to this Court from any judgment, sentence or
order of the Special Court within a period of 30 days from the date of such
judgment etc. Under the proviso to Section 10(3) this Court has been empowered
to entertain the appeal even after the expiry of a period of 30 days if the
court is satisfied that the appellant had sufficient cause for not preferring
appeal within the period of limitation. Section 13 provides that the provisions
of the Act would have overriding effect over other laws. These, in short, are
the provisions of the Act which are material for the purposes of this appeal.
The Act came into force on 6th June, 1992. The appellant was notified along
with others under Section 3(2) on 20th November, 2001. On 23rd November, 2001, the Custodian informed the appellant that it had been notified under Section 3(2)
of the Act and its properties stood attached with effect from the date of the
notification. The appellant was requested to furnish the Custodian the details
of its properties as on the date of the notification. In answer to the
Custodian's letter, the appellant asked for the reasons and circumstances which
formed the basis of the Custodian's decision to notify the appellant. The
appellant also stated that it was in the process of submitting details of its
properties. On 8th October, 2002, the appellant filed a petition of objection
to the notification under Section 4(2) of the Act. The Special Court rejected the
application solely on the ground that it was filed beyond the period of
limitation prescribed by Sub-section (2) of Section 4.
The appellant has contended that the Custodian had issued the notification
under Section 3(2) of the Act almost 10 years after coming into force of the
Act. It is submitted that the notification was also otherwise invalid.
According to the appellant the right of notified persons to object to a
notification under Section 4(2) was a valuable right, since the consequences of
being notified were drastic viz. the attachment of all properties both
immoveable and moveable. It is submitted that the notified persons could not be
deprived of the right merely on the ground of limitation. It is submitted that
the rule of limitation was a procedural requirement and like all matters of
procedure should serve to further the ends of justice and not defeat it.
Learned counsel for the appellant has referred to the decisions of this Court
in Chairman, Prabha D. Naik & Anr. 2001 (4) SCC 713 and C.
SCR 836 in support of this submission. According to the appellant the
provision prescribing a period of limitation in Section 4(2) was directory and
therefore the Special Court could not reject the application only because of
non compliance with such a directory provision. The absence of any penal
consequence, according to the appellant's counsel, showed that the non
fulfillment of the requirement to file an objection within a specified time
would not vitiate the substantive right of the notified person to question the
notification. The decision of (6) SCC 33, has been relied on as an authority
for this proposition. The next submission of the appellants' counsel was based
on the applicability of Section 29(2) of the Limitation Act, 1963
whereby, according to him, the provisions of inter alia Section 5 of the Limitation Act
would be applicable to petitions under Section 4(2) of the Act. The contention
is that Section 29 (2) of the Limitation Act,
1963 would be automatically applicable to all Special Acts such as the Act
in question, since the Act provides for a period of limitation different from
the period prescribed under the Limitation Act, 1963 and
since the provisions of Limitation Act
had not been excluded either expressly or by necessary implication. It is also
argued on the basis of the decision of this Court in Mangu Ram v. Municipal
Corporation of Delhi 1976 (1) SCC 392 and Vidyacharan Shukla v. Khub Chand
Baghel 1964 (6) SCR 129 that merely because a power to condone the delay had
been granted under Section 10(3), it could not be construed as a necessary
exclusion of the same power under Section 5 of the Limitation Act
in respect of Section 4(2). It is, however conceded by learned counsel
appearing on behalf of the appellant that this Court has in L.S. Synthetics Ltd
Fairgrowth Financial Services Ltd. & Anr. 2004(7) SCALE 427 held that
the provisions of Limitation
Act, 1963 did not apply to the Act. However, it is submitted that
irrespective of the wide language in which the conclusion of the Court had been
stated in that case, the reasoning showed that it was limited to the question
whether the periods prescribed under the Limitation Act
applied to Section 11 of the Act. It is submitted that the decision in L.S.
Synthetics must be narrowly construed, as otherwise the conclusion would be
based on a factual error. Our attention was drawn to paragraphs 38 and 39 of
the decision as reported where this Court has held that the provisions of the Limitation Act
were excluded because the Act did not provide for any period of Limitation. It
is pointed out that the Act was not a complete code since Sections 4(2) and
10(3) did provide for a period of Limitation.
Learned counsel appearing on behalf of the Custodian has stated that the
period of limitation prescribed under Section 4(2) could not be said to be
merely directory. The decision in Topline (supra) was said to be
distinguishable and in any event not good law in view of the subsequent
decision of a larger Bench in Dr. J.J. Merchant V. Shrinath Chaturvedi: 2002(6)
SCC 635. It is submitted that Section 29 (2) of the Limitation Act would have
no application to the Act because it is clear from the object and scheme of the
Act that the period prescribed under Section 4(2) of the Act was not extendable
by Court. The conferment of such power expressly in connection with appeals
under Section 10 according to the learned counsel for the Custodian necessarily
implied the exclusion of such power in the Court under Section 4(2). This fact
coupled with Section 13 which gives overriding effect to the provisions of the
Act, it was submitted, a clear indication that the provisions of the Limitation Act
would not apply. Reliance has Karuna Sardar 2004(4) SCC 252, in this
connection. Finally, it is contended that the question raised in this appeal
must be taken to have been concluded by the decision of three Judges in L.S.
Synthetics case (supra).
We are of the view that the provision prescribing a time limit for filing a
petition for objection under Section 4(2) of the Act is mandatory in the sense
that the period prescribed cannot be extended by the Court under any inherent
jurisdiction of the Special Court. Prescribed periods for initiating or taking
steps in legal proceedings are intended to be abided by, subject to any power
expressly conferred on the court to condone any delay.
Thus the Limitation
Act 1963 provides for different periods of limitation within which suits,
appeals and applications may be instituted or filed or made as the case may be.
It also provides for exclusion of time from the prescribed periods in certain
cases, lays down bases for computing the period of limitation prescribed and
expressly provides for extension of time under Section 5 in respect of certain
proceedings. If the periods prescribed were not mandatory, it was not necessary
to provide for exclusion or extension of time in certain circumstances nor
would the method of computation of time have any meaning.
Section 4 (2) of the Act plainly read similarly requires a person objecting to
a notification issued under sub-section (2) of Section 3 to file a petition
raising such objections within 30 days of the issuance of such notification.
The words are unequivocal and unqualified and there is no scope for reading in
a power of Court to dispense with the time limit on the basis of any principle
of interpretation of statutory provisions. In R.
Rudraiah v. State of Karnataka 1998(3) SCC 23 it was contended on behalf of
the appellants that Section 48-A of the Karnataka Land Reforms Act, 1961 which
provided for the making of an application within a particular period should be
construed liberally in favour of tenants so that the period was to be read as
extendable. The submission was rejected on the ground that the language of
Section 48-A was unambiguous and could not be interpreted differently only on
the ground of hardship to the tenants.
The mere fact that the Special Court may have been imbued with the same
status of a High Court would not alter the situation. We are of the view that
it was not necessary for Section 4(2) of the Act to use additional peremptory
language such as "but not thereafter" or "shall" to mandate
that an objection had to be made within 30 days. The mere use of the word
"may" in Sections 4 (2) of the Act does not indicate that the period
prescribed under the Section is merely directory. The word 'may' merely enables
or empowers the objector to file an objection. The language in Section 4(2) of
the Act may be compared with Sections 4 and 6 of the Limitation Act,
Section 4 of the Limitation Act
"4.Expiry of prescribed period when court is closed:- Where the
prescribed period for any suit, appeal or application expires on a day when the
court is closed, the suit, appeal or application may be instituted, preferred
or made on the day when the court reopens." Certain sub-sections of
Section 6 of the Limitation
Act also provide for the period within which a minor or insane or an idiot
may institute suits. It cannot be contended that the word "may" in
these Sections indicate that the prescribed periods were merely directory. This
Court in Mangu Ram v. Municipal Corporation of Delhi 1976 (1) SCC 392 described
statutory provisions of periods of limitation as "mandatory and
compulsive" and also said:- "It is because a bar against
entertainment of an application beyond the period of limitation is created by a
Special or local law that it becomes necessary to invoke the aid of Section 5
(of the Limitation
Act) in order that the application may be entertained despite such
If the power to condone delay were implicit in every statutory provision
providing for a period of limitation in respect of proceedings before Courts,
Section 29(2) of the Limitation Act 1963 would
be rendered redundant. We will discuss the scope and applicability of Section
29(2) in greater detail subsequently.
It is not for the Courts to determine whether the period of 30 days is too
short to take account the various misfortunes that may be faced by notified
persons who wish to file objections under Section 4(2) of the Act nor can the
Section be held to be directory because of such alleged inadequacy of time. As
was held by the Privy Council in Nagendra Nath v.
Suresh AIR 1932 P.C. 165:- "The fixation of periods of limitation must
always be to some extent arbitrary and may frequently result in hardship. But
in construing such provisions equitable considerations are out of place, and
the strict grammatical meaning of the words is, their Lordships think, the only
safe guide." [See also: Antonysami v. Arulanandam Pillai (dead) By Lrs.
& Anr. 2001(9) SCC 658, 666].
In any event the statutory attachment of the property of the notified party
under Section 3, sub-section 3, of the Act, is subject to a final decision on
the matter by the Special Court under Section 9(A) and Section 11 of the Act.
It is, in that sense just an interim measure.
The three decisions relied upon by the appellant, namely, Sangram Singh V.
Election Tribunal, Kotah Bhurey Lal Baya, 1955 (2) SCR 1, Syndicate Bank V.
Prabha (supra) and C. Beepathumma (supra) do not deal with statutes which could
be said to be in pari materia with the Act. In Sangram Singh, this Court had to
consider whether the Election Tribunal was justified in refusing to recall an
order directing that an election petition should be disposed of ex-parte. It
was noted that Section 19(2) of the Representation of Peoples Act, 1951
directed the Tribunal to follow the procedure prescribed for trials under the
Civil Procedure Code. It was found on a construction of the provisions of the
Code of Civil Procedure as they then stood, that the Court had the power to allow
a defendant to participate in the proceedings even after the passing of an
order that the trial should be proceeded with ex- parte. Both the cases i.e.
Syndicate Bank and C.
Beepathuma have been citied as authorities for the proposition that the law
of limitation is a procedural law and the provisions existing on the date of
the suit would apply. We have no quarrel with this proposition but we fail to
see the relevance of the decisions to the question to be decided in this
None of these decisions touch the question whether a statutory provision
such as Section 4(2) of the Act should be treated as mandatory or directory.
The decision which does deal with this question is Topline Shoes Ltd. V.
Corporation Bank 2002 (2) SCC 33.
The subject matter of interpretation in that case was Section 13(1)(a) of
Protection Act, 1986 which provides that a person opposing the complaint
under the Act was required to file an answer to the complaint "within a
period of 30 days or such extended period not exceeding fifteen days as may be
granted by the District Forum". The Court took into account the provisions
of the Consumer
Protection Act, 1986 and came to the conclusion that the period for
extension of time "not exceeding fifteen days" was directory in
nature and was an expression of "desirability in strong terms". While
expressing our reservation about the correctness of the view expressed in
Topline Shoes Ltd., it is not necessary for us to expatiate on such reservation
in view of the subsequent decision of this Court in Dr. J.J. Merchant's case by
a larger Bench in which the provisions of Section 13(1)(a) of the Consumer
were also construed. The Court categorically held that the outer period of 45
days to submit an answer of a complaint had to be adhered to strictly. Given
the view expressed by a larger Bench, it would not be appropriate for us to
proceed on the opinion expressed earlier by a smaller Bench in Topline Shoes.
[See in this connection Union of India & Ors. V. K.S.
Subramanian AIR 1976 SC 2433]. We are therefore of the view that the period
for filing an objection in Section 4(2) in the Act is a mandatory provision
given the language of the Section and having regard to the objects sought to be
served by the Act.
This brings us to the question whether the power to condone the delay in
filing a petition under Section 4(2) exists in the Special Court. We have held
that the statute itself does not provide for it. A possible source of the power
could be Section 5 of the Limitation Act,
1963, provided it applies to the Act. Section 29(2) of the Limitation Act,
1963 provides for the application of the provisions of Section 4 to Section
24 of the 1963 Act including Section 5, to any special or local law which
prescribes a period of limitation in respect of any suit, appeal or application
different from the period prescribed under the Limitation Act.
In other words, the general rule as far as special and local Acts are
concerned, is that the specified provisions including Section 5 of the Limitation Act
will apply provided the Special or Local Act provides a period of limitation
different from that prescribed under the Limitation Act.
There is an additional requirement viz that the Special/Local Act does not
expressly exclude the application of the Limitation Act
. It has been held in Union of India V. Popular Construction Co.
2001 (8) SCC 470 that the word 'exclusion' also includes 'exclusion by
necessary implication'. This proposition of law is not in dispute. The only
question is does the Act expressly or necessarily exclude the provisions of Limitation Act?
We think it does. The fact that it has provided for a power to condone delay
under Section 10(3) of the Act, shows that Parliament had consciously excluded
the power of the Court in relation to Section 4(2). This view also finds
support in the decision of this Court in Gopal Sardar V. Karuna Sardar 2004 (4)
The statutory provision under consideration in that case was Section 8 of
the West Bengal Land Reforms Act, 1955. It was held:
"When in the same statute in respect of various other provisions
relating to filing of appeals and revisions, specific provisions are made so as
to give benefit of Section 5 of the Limitation Act
and such provision is not made to an application to be made under Section 8 of
the Act, it obviously and necessarily follows that the legislature consciously
excluded the application of Section 5 of the Limitation Act.
The decision relied upon by learned counsel for the appellant, namely, Mangu
Ram (supra) has been distinguished in Gopal Sardar vs. Karuna Sardar, in our
opinion, correctly. In Mangu Ram's case the Court had to deal with the question
whether despite the mandatory period of limitation provided in sub-Section (4)
of Section 417 of the Criminal Procedure Code,1898, it excluded the application
of Section 5 of the Limitation Act 1963.
The provisions of Section 29(2)(b) of the Limitation Act,
1963, were construed and it was held:- "Mere provision of a period of
limitation in howsoever peremptory or imperative language is not sufficient to
displace the applicability of Section 5".
But in this case apart from the mandatory and compulsive provisions of
sub-Section (2) of Section 4 of the Act, there are in addition two provisions
of the Act which show that the provisions of Section 5 of the Limitation Act,
1963 cannot be invoked. These are: an express provision for condonation of
delay under Section 10(3) and the non-obstante provision in Section 13 of the
Act which states that the provisions of the Act :- ".shall have effect
notwithstanding anything inconsistent herewith contained in any other law for
the time being in force or in any instrument having effect by virtue of any
law, other than this Act, or in any decree or order of any Court, tribunal or
other authority." The decision in Competent Authority Tarana v. Vijay
Gupta; 1991 Supp. (2) SCC 631 no doubt held that the provisions of the Madhya
Pradesh Ceiling of Agricultural Holdings Act, 1960 will not exclude the
provisions of Section 5 of the Limitation Act.
However, there is no reference to the provisions of the Madhya Pradesh Act
which persuaded the Court to arrive at such conclusion.
Reliance on the decision in Vidya Charan Shukla V.
Khub Chand 1964 (6) SCR 129 by the appellant is equally misplaced. One of
the issues raised in that case related to the question whether Section 116-A of
the Representation of People Act, 1951 could be construed as expressly or
impliedly excluding the provisions of the Limitation Act, 1908 as would
otherwise be applicable under Section 29(2)(a) of that Act. The argument was
that sub-section 3 of Section 116-A of the 1951 Act not only provided for a
period of 30 days to prefer an appeal from the date of an order of the Tribunal
to the High Court, but also provided that the High Court could entertain an
appeal after the expiry of the period only if it was satisfied that the
appellant had sufficient cause for not preferring an appeal within such period.
The sub-section under consideration in Vidya Charan Sukhla was, therefore,
substantially similar to Section 10(3) of the Act which is required to be
construed by us. But that is where the similarity ends. The Court in that case
held that the proviso did not amount to an express or implied exclusion because
of the wording of Section 29(2)(a) of the Limitation Act, 1908. Section 29(2)
(a) of the 1908 Act is dissimilar from the provisions of section 29(2)(b) of
Act, 1963. The earlier version of Section 29 made the provisions of Section
4, 9 to18 and Section 22 applicable to a Special or Local Act unless the
Special or Local law expressly excluded such applicability. In other words,
even in the absence of any exclusionary clause in the Special or Local Act, the
other provisions of the Limitation Act
including Section 5 would not apply. It was, therefore, held that the proviso
in sub- section 3 of Section 116-A of the Limitation Act, 1951 had become
necessary, because, if the proviso was not enacted, then by virtue of Section
29 (3)(a) of the Limitation Act, 1908 it would have excluded the operation of
Section 5 of the Limitation Act with the result that even if sufficient cause
for the delay existed the High Court would have been helpless to exclude the
delay. It was held that proviso to sub-Section (3) of Section 116-A of the 1951
Act only restored the power under Section 5 denied to the Court under Section
29(2)(b) of the Limitation Act, 1908. The same reasoning would not apply with
regard to Section 29(2)(b) of the Limitation Act,
1963. Under the 1963 Act, Section 29(2)(b), inter-alia, provides that
Section 5 of the Limitation
Act would apply under that section to a Special/Local Act unless
specifically excluded. The decision in Vidya Charan Shukla was noted in
Hukumdev Narayan Yadav V. L.N. Mishra 1974(2) SCC 133 and it was held that this
particular controversy was no longer relevant for determining whether such a
special or local Act excluded the provisions of the Limitation Act
within the meaning of the word "exclude" in Section 29(2)(b) of the
Act. The decision of Hukumdev Narayan has in turn been considered and followed
by this Court in Gopal Sardar V. Karuna Sardar 2004 (4) SCC 252.
The argument of the appellant then is that the provisions for exclusion of
time contained in Section 4 to 24 of the Limitation Act
if not included would lead to an incongruous result. For example an appeal
would be barred by time even though a copy of the order of the Special Court
was not made available to the appellant, because Section 12(2) of the Limitation Act
would not be available. The argument is unacceptable. The time taken by the
appellant for obtaining a copy of the order appealed against may be a factor
relevant to the exercise of discretion by this Court under Section 10(3) of the
Act. The exclusion of Sections 4 to 24 of the Limitation Act
would only mean that the appellant could not claim the exclusion of time as
provided under those Sections as a matter of right but could raise pleas on
grounds available under those Sections to establish 'sufficient cause' under
The decision by a larger Bench in L.S. Synthetics Ltd.
(supra) holding that the provisions of the Limitation Act,
1963 do not apply to the Act may not have, by itself, concluded the
question formulated by us at the outset. That case was, as has been rightly
contended by learned counsel appearing on behalf of the appellant, limited to a
consideration of Section 11 of the Act and the proceedings by the Special Court
It was in that context that the Court had said that the Act had not provided
for any period of limitation. But for the reasons already stated by us we
concur in the final conclusion reached by the Court in L.S. Synthetics to the
extent that the provisions of the Limitation Act 1963
have no application in relation to a petition under Section 4(2) of the Act.
Finally, Section 29(2) of the Limitation Act
speaks of application of the provisions contained in Sections 4 to 24
"only in so far as, and to the extent to which they are not expressly
excluded by such special or local laws". This language, together with our
earlier reasoning, particularly with regard to L.S. Synthetics, would answer
the further question raised by the appellant, namely, whether the question of
exclusion of the provisions of the Limitation Act
must be separately considered with reference to different provisions of a
Special/Local Act or in connection with the provisions of the Special/Local
Act, as a whole, by affirmation of the first alternative. We are therefore not
called upon to decide whether claims either preferred for the first time before
the Special Court or transferred to the Special Court under Section 9-A(2)
would attract the provisions of Sections 4 to 24 of the Limitation Act.
It is enough for the purpose of this appeal to hold that Section 29(2) of the Limitation Act,
1963 does not apply to proceedings under Section 4(2) of the Special Courts
(Trial of Offences Relating to Transactions in Securities), Act 1992. Since the
appellant's petition of objection had been filed much beyond the period
prescribed under that Section, the Special Court was right in rejecting the
petition in limine. The appeal is accordingly dismissed but without any order
as to costs.